A Market-Based Measure of Climate Transition Risk

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Joop Huij, Dries Laurs, Philip Stork, and Remco C. J. Zwinkels

Carbon beta measures a stock’s sensitivity to climate transition risk using a pollutive-minus-clean factor. It measures climate exposure, aligns with forward looking risk indicators, and shows that high-carbon-beta firms underperform when climate shocks occur.

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